Long Bond Yield at 6.24%...what does this mean?


-- concerned (and @ clueless.com), August 09, 1999

Answers

The value of 30 year bonds now in existance is going down because people expect/demand higher yields. An existing bond has a fixed rate so if you sell that bond to someone else, they will not pay as much as you did for it. It also means the cost of running the government ( a very big borrower) will go up. Also stock prices tend to go down when interest rates rise.

-- rambo (rambo@thewoods.com), August 09, 1999.

Perhaps this is the market working due to competitive bidding for the increased corporate bond offerings. Ford Motor and others have been big issuers in third quarter in anticipation of drop in demand for corporate paper in fourth qtr due to Y2K liquidity fears. With Ford and others offering higher rates, it appears the market may be pricing the long bond lower to compete for yields. If trend continues it would be a signal of higher interest rates and lower stock values.

-- Bill P (porterwn@one.net), August 09, 1999.

One thing it reflects is the fact that Long Bond interest rates have risen over 32% since last fall !!

Quite a HIT for Uncle Sam.

Ray

-- Ray (ray@totacc.com), August 09, 1999.

In less euphoric times, it meant that the yield from relatively safe bonds was approaching that of relatively risky stocks (which, as noted above, triggered moves from stocks to bonds). Nowadays, it seems more abstract given that investors get snooty over returns-on-investment of <20%. The more seasoned investors on the street will still see the thunderclouds beginning to form. The irony is that all these Wall Street kids -- Gen-X-ers with 7-digit incomes -- get more bothered by a 0.25% interest rate hike than the fundamental risk (and risk to fundamentals) of y2k. Go figure. For those interested, there were some posts a ways back (I think by "Andy" the gold guy) that got some rather surreal risks posed by hedge fund collapses and currency crises. These read like a made for TV movie.

-- Dave (aaa@aaa.com), August 09, 1999.

It is one of several interest rates that have risen recently. Not only the "long bond" (the 30 year US Treasury bond), but also shorter term Treasury notes, corporate bonds, and mortgages, have experienced rising interest rates recently.

Also, interest rate "speads" have been increasing. For example, rates for corporate bonds have been going up relatively faster than rates for T bonds.

Various "interest rate sensitive" activities will be adversely affected, some by the rising rates, some by the rising spreads.

As for "what does this mean", well, the very short answer is that in some parts of the market the current demand for credit is increasing relative to the current supply of credit (and not only within the USA). The long answers get too long for my typing skills. :-)

Jerry

-- Jerry B (skeptic76@erols.com), August 09, 1999.

This isn't an answer, but adding to the original question. I akes my dad once what to watch to know when the market was going to tank, and he said to watch the long bond interest rate... when it went up, it was bad news for the market.

He didn't explain why, and I am not inclined to invest, so don't really understand the logic. To those of you who do, is this a signal that the market will drop soon?....

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-- housemouse (jgj@nevermind.net), August 09, 1999.

It means that the skipper just told the Orchestra to keep playing,everthing is alright just a little block of ice thats all.

-- NewParadigm (unsinkable@Bubble.gone), August 09, 1999.

This thing with the corporate bond issues is a big joke. Like if I sell you a bond now, you won't worry about Y2K, but in October, you will be worried. Hmm, well, I guess that's the truth. That's about how short sighted the investors are being.

-- Mara Wayne (MaraWayne@aol.com), August 09, 1999.